Revised viability policies resulting in more "realistic" land values in new schemes, says GLA planning chief

New national policies and guidance on viability are resulting in more "realistic" land valuations in new developments and reducing "confusion and contest" around the issue, the Greater London Authority's (GLA's) viability planning chief has said.

John Wacher speaking earlier today
John Wacher speaking earlier today

John Wacher, the GLA's strategic planning manager for viability, was speaking this morning at the National Planning Summit, which is organised by Planning, in central London.

Wacher was asked if the changes to viability requirements in the 2018 National Planning Policy Framework (NPPF) and accompanying Planning Practice Guidance (PPG) had had any impact on the ground.

Last year's revised NPPF and PPG set out a plan-based approach to viability, advising councils to establish affordable housing and other developer contribution requirements in their local plans. The idea was to prevent the need for further viability assessments at the application stage. 

In addition, land values informing viability assessments should be calculated using a site’s existing use value (EUV) plus a premium for the landowner and explicitly not on the price paid for a site, the NPPF and PPG said. The aim, the government said, was to end the cycle of ever-higher land prices being used to justify lower affordable housing contributions.

Wacher said: "We are all working to try and understand the practical implications of the new guidance, which we generally see as very positive and starting to rebalance the system.

"It's clear that in London, in some of the areas where there was some confusion and contest around land value, that's largely being resolved. 

"We are seeing very few applications coming in solely based on market transactions to influence the benchmark land value. 

"And we've seen profit levels reduced to an area that's more realistic."

Wacher said it was too early to tell the impact of viability testing at the plan-making stage.

Also speaking at the same session was Tony Mulhall, associate director at the Royal Institution of Chartered Surveyors (RICS). 

He said some RICS members in the North East had felt there was "a lack of consultation" between councils and the development sector when establishing viability requirements at the plan-making stage. 

Wacher went on to say that the London mayor's new supplementary planning guidance on affordable housing, which introduces tougher viability requirements for applicants, had had a similar impact in the capital as national policy changes.

The SPG introduced a new "threshold approach" to viability, under which applications for developments providing at least 35 per cent affordable housing, without public subsidy, are ‘fast-tracked’ through the planning process, without the need to provide detailed viability information. 

Wacher said: "The initial signs are that the threshold approach helping to improve affordable housing levels in London."

He said overall average levels in new schemes had recently risen to 34 per cent which was "much higher compared with lower levels secured in previous years".

He added: "We are now seeing more realistic levels of target return adopted in financial viability assessments. 

"We are seeing the EUV approach being used much more commonly in viability assessments. And the market value approach being used to a lesser extent.

"All of this is helping to promote much better outcomes in terms of affordable housing delivery."

Meanwhile, Mulhall said that RICS is reviewing its 2012 guidance on financial viability in planning, which will take into account the publication of the revised NPPF and PPG.

"We hope to have a draft completed by the end of this month, for consultation," he said, adding that the aim was to reflect the intention of new national policy "to frontload the discussion on viability into the plan-making stage and reduce the amount of testing at the development management stage".

In addition, seperate RICS guidance on members' professional conduct, which the institution consulted on last October, "will be out next week", he added.

Mulhall also warned plan-makers that they should "ensure policy requirements don't undermine the deliverability of the plan".

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